By Ajibola Aminu
As World economies transit from fiat currency to digital currencies especially cryptocurrency, the Nigerian government has finally woken up to the reality of an indeed digital global market.
Steering clear from its earlier move in which the Central Bank of Nigeria placed a ban on cryptocurrency related transactions such Bitcoin, Etherium, and other similar coins, and threatening commercial banks with sanctions should they fail to comply, the apex bank has embarked on a journey many Nigerians have tagged “hypocrisy”.
The bank of Nigeria (CBN) announced in June that it will launch its digital currency by the end of 2021. To reaffirm this development, the CBN Drector of Information Technology, Rakiya Mohammed, stated in a private webinar that the apex bank would launch its digital currency pilot scheme, e-Naira, on October 1, 2021.
Here are 5 things you need to know about CBN E-naira.
It comes in two varieties
The Central Bank Digital Currency (CBDC) comes in two varieties; wholesale CBDC and retail CBDC. This classification is based on the intended user. While retail CBDC allows the CBN and citizens to have direct financial relationships, wholesale CBDC lets banks and financial institutions act as intermediaries between the apex bank and the citizens, i.e. you can have direct relationship with the CBN if you’re to be using retail CBDC.
This is a way of working or doing something that is composed of elements of two separate systems. So, the new Nigerian digital currency will operate on a hybrid system, which is a combination of both retail and wholesale. The digital naira would be issued by the Central Bank of Nigeria and held directly in the digital wallets of Nigerians. It would be recognized as a form of payment and regulated by the CBN.
Hyperledger Fabric blockchain usage
The Hyperledger Fabric blockchain is a private and permissioned blockchain network designed by a computer hardware company, International Business Machines Corporation (IBM). These are permissioned blockchains in that each party is identified and every transaction is authenticated, authorized, validated, and tracked.
It will be monitored by the CBN
We all know that the Bitcoin and Ethereum are both digital currencies. One important distinction is that while cryptocurrency is decentralized and users are anonymous, CBDCs are centralized. Cryptocurrencies cannot be monitored, but CBDCs issued by the CBN will be monitored and regulated.
The value of the CBN’s digital currency will most likely be tied to the naira like China’s digital yuan, which functions as a replacement for the yuan, i.e. one digital yuan equals one physical yuan. Definitely, the CBN’s digital currency will experience the same depreciation and inflation as the naira.
Here’s a bonus:
The Central Bank of Nigeria will determines who is granted access to use the platform or not. It reserves the rights to approve or override transactions as it deems fit.